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Gov. Ralph Northam kicked the Virginia sports betting bill back to the legislature with suggested amendments last week.
On the surface, none of the potential changes jumps out as particularly notable. A closer examination, however, shows that one of the amendments could send VA sports betting licensing fees soaring into the millions.
A suggested $50,000 background check fee for anyone defined as a “principal” for an operator does not look onerous initially. The definition of principal, however, covers a broad swath of a company:
“Principal” means any individual who solely or together with his immediate family members (i) owns or controls, directly or indirectly, five percent or more of the pecuniary interest in any entity that is a permit holder or (ii) has the power to vote or cause the vote of five percent or more of the voting securities or other ownership interests of such entity.
“Principal” includes any individual who is employed in a managerial capacity for a sports betting platform on behalf of a permit holder.
It’s the last line of that definition that caught the attention of sports betting operators. Paying $50,000 a head among management for background checks would be unprecedented in the US market.
The bill already requires operators to pay $250,000 for a three-year license and $200,000 for renewal. Those license fees do not approach Pennsylvania’s onerous $10 million or the sliding seven-figure scale of Illinois.
Yet some operators told LSR they estimate as many as 20 employees might fall under Virginia’s principal definition. That amount would add a startup cost of $1 million per sportsbook.
One industry source indicated to LSR that Virginia legislators and regulators might be open revising the fee structure. It seems difficult to imagine sportsbook operators accepting not only these costs but also the precedent for other states to copy.
The Virginia sports betting bill approved up to 18 total online sportsbook licenses:
Sent down with some amendments that seem to be agreeable to both House and Senate patrons. Not a poison pill. So we will have sports betting in Va.
— Marcus Simon (@marcussimon) April 12, 2020
Northam also requested legislators add NASCAR to the list of major league sports franchises that could request in-stadium sports wagering. Both Virginia and Maryland appear interested in using sports betting to lure the Washington Redskins in a stadium deal.